[Federal Register Volume 66, Number 203 (Friday, October 19, 2001)]
[Rules and Regulations]
[Pages 53078-53080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26337]


=======================================================================
-----------------------------------------------------------------------

EMERGENCY STEEL GUARANTEE LOAN BOARD

13 CFR Part 400

RIN 3003-ZA00


Emergency Steel Guarantee Loan Program; Third-party Enhancement 
of Guarantees; Refinancing and Transfer Restrictions

AGENCY: Emergency Steel Guarantee Loan Board.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Emergency Steel Guarantee Loan Board (Board) is amending 
the regulations governing the Emergency Steel Guarantee Loan Program 
(Program). These changes are meant to provide for supplemental 
guarantees by third parties and to change restrictions on refinancing 
existing credit and on loan guarantee transfers by Lenders. The intent 
of these changes is to increase participation in the Program by 
lenders.

DATES: This rule is effective October 19, 2001.

FOR FURTHER INFORMATION CONTACT: Marguerite S. Owen, General Counsel, 
Emergency Steel Guarantee Loan Board, 1099--14th Street, NW., Suite 
2600 East, Washington, DC 20005, (202) 219-0584.

SUPPLEMENTARY INFORMATION: On October 27, 1999, the Board published a 
final rule codifying at Chapter 4, Title 13, Code of Federal 
Regulations (CFR), regulations implementing the Program, as established 
in Chapter 1 of Public Law 106-51, the Emergency Steel Loan Guarantee 
Act of 1999 (64 FR 57932). Since those initial regulations were 
published the Board has made a number of changes to the regulations 
meant to conform the regulations to the Guarantee Agreement between the 
government and the lender, to allow for participations in unguaranteed 
tranches of loans guaranteed under the Program, to harmonize certain 
program requirements with commercial lending practices, streamline 
program operation, open a second period for the submission of 
applications and allow for certain delegations of authority. Today the 
Board is making additional changes designed to align Program 
administration with legal requirements and to increase participation by 
lenders in the Program. Section 400.106 is being revised to reflect the 
fact that the Program's evaluation process is no longer competitive and 
hence the concept of ex parte communications is no longer applicable. 
As revised, the rule prohibits only communications not on the public 
record between a member of the Board and an interested party, in order 
to avoid a situation where one member of the Board receives or conveys 
information concerning a pending application that is not available to 
other members of the Board. Section 400.205 is being modified to 
reflect that the Board has extended the deadline for applications from 
April 2, 2001 to August 31, 2001. With respect to increasing lender 
participation, a new Sec. 400.215 is added to allow for supplemental 
guarantees by third parties, including state and local governments and 
related provisions are being modified to reflect that change. Section 
400.210 is being modified to allow for transfers of interests in 
guaranteed loans to Eligible Lenders without prior Board approval. 
Section 400.201 is being amended to allow refinancing of the applicant 
lender's existing credit if the applicant's risk exposure is at least 
substantially equivalent.
    Public Law 106-51 has a requirement that the Board take into 
account the prospective earning power of the Borrower together with the 
nature and character of the security pledged in making a determination 
that there is a reasonable assurance of repayment of the loan sought to 
be guaranteed. The Program's regulations, at Sec. 400.207, currently 
describe the Board's assessment of the nature and character of the 
security pledged for a loan, but do not address the Board's review of 
the prospective earning power of the Borrower. However, in compliance 
with the law, the Board has always evaluated the Borrower's prospective 
earning power in making a determination whether there is a reasonable 
assurance of repayment of the loan sought to be guaranteed. This rule 
will amend the Board's regulations to make clear that the Board does 
assess a Borrower's prospective earning power in making such a 
determination. In particular, the

[[Page 53079]]

rule makes clear that an essential and necessary criterion of the 
Board's evaluation of the application will be the commitment of the 
Borrower to undertake steps to eliminate or reduce economically 
unviable capacity.
    On June 5, 2001, President Bush announced a three-pronged steel 
initiative aimed at addressing the current problems of the U.S. steel 
industry, eliminating inefficient excess capacity globally and 
restoring market forces to world steel trade. A key component of this 
initiative is the restructuring and rationalization of the steel 
industry, both at home and abroad, with a particular focus on reducing 
or eliminating economically unviable steelmaking capacity. The Board's 
evaluation of the prospective earning power of a Borrower is in 
compliance with the President's initiative and seeks to further its 
goals by reviewing restructuring efforts aimed at the reduction or 
elimination of economically unviable capacity in making a determination 
whether to approve a Loan Guarantee.

Administrative Law Requirements

Executive Order 12866

    This final rule has been determined not to be significant for 
purposes of Executive Order 12866.

Administrative Procedure Act

    This rule is exempt from the rulemaking requirements contained in 5 
U.S.C. 553 pursuant to authority contained in 5 U.S.C. 553(a)(2) as it 
involves a matter relating to loans. As such, prior notice and an 
opportunity for public comment and a delay in effective date otherwise 
required under 5 U.S.C. 553 are inapplicable to this rule.

Regulatory Flexibility Act

    Because this rule is not subject to a requirement to provide prior 
notice and an opportunity for public comment pursuant to 5 U.S.C. 553, 
or any other law, the analytical requirements of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., are inapplicable.

Congressional Review Act

    This rule has been determined to be not major for purposes of the 
Congressional Review Act, 5 U.S.C. 801 et seq.

Intergovernmental Review

    No intergovernmental consultations with State and local officials 
are required because the rule is not subject to the provisions of 
Executive Order 12372 or Executive Order 12875.

Unfunded Mandates Reform Act of 1995

    This rule contains no Federal mandates, as that term is defined in 
the Unfunded Mandates Reform Act, on State, local and tribal 
governments or the private sector.

Executive Order 13132

    This rule does not contain policies having federalism implications 
requiring preparation of a Federalism Summary Impact Statement.

Executive Order 12630

    This rule does not contain policies that have takings implications.

List of Subjects in 13 CFR Part 400

    Administrative practice and procedure, Loan programs-steel, 
Reporting and recordkeeping requirements.

    Dated: October 15, 2001.
Daniel J. Rooney,
Executive Secretary, Emergency Steel Guarantee Loan Board.

    For the reasons set forth in the preamble, 13 CFR part 400 is 
amended as follows:

PART 400--EMERGENCY STEEL GUARANTEE LOAN PROGRAM

    1. The authority citation of part 400 continues to read as follows:

    Authority: Pub. L. 106-51, 113 Stat. 252 (15 U.S.C. 1841 note); 
Pub. L. 106-102, 113 Stat. 1338.
    1a. Section 400.2 is amended by redesignating paragraphs (h) 
through (l) as paragraphs (i) through (m), adding new paragraphs (h), 
(n) and (o), and revising paragraph (a) and newly redesignated 
paragraphs (j) and (l), to read as follows:


Sec. 400.2  Definitions.

    (a) Act means the Emergency Steel Loan Guarantee Act of 1999, 
Chapter 1 of Public Law 106-51 (113 Stat. 252), as amended.
* * * * *
    (h) Guaranteed Portion means the portion of the principal of a loan 
that is subject to the Guarantee.
* * * * *
    (j) Loan Documents mean the loan agreement and all other 
instruments, and all documentation between the Lender and the Borrower 
evidencing the making, disbursing, securing, collecting, or otherwise 
administering of the loan. It includes any agreement and other 
documents relating to a Supplemental Guarantee. Loan Documents may not 
be modified without the prior written approval of the Board.
* * * * *
    (l) Security means all property, real or personal, required by the 
provisions of the Guarantee or by the Loan Documents to secure 
repayment of any indebtedness of the Borrower under the Loan Documents 
or Guarantee. It does not include a Supplemental Guarantee.
* * * * *
    (n) Supplemental Guarantee means a guarantee provided by one or 
more third parties, public or private, of part of the Unguaranteed 
Portion of a guaranteed loan.
    (o) Unguaranteed Portion means the portion of the principal of a 
loan that is not covered by the Guarantee.

    2. Section 400.106 is revised to read as follows:


Sec. 400.106  Ex parte communications.

    Oral or written communication, not on the public record, between 
any member of the Board and any party or parties interested in any 
matter pending before the Board concerning the substance of that matter 
is prohibited.

    3. Section 400.201 is amended by revising paragraphs (c) and (d) to 
read as follows:


Sec. 400.201  Eligible Lender.

* * * * *
    (c) Status as a Lender under paragraph (a) of this section does not 
assure that the Board will issue the Guarantee sought, or otherwise 
preclude the Board from declining to issue a Guarantee. In addition to 
evaluating an application pursuant to Sec. 400.207, in making a 
determination to issue a Guarantee to a Lender, the Board will assess:
    (1) The Agent Lender's level of regulatory capital, in the case of 
banking institutions, or net worth, in the case of investment 
institutions;
    (2) Whether the Agent Lender possesses the ability to administer 
the loan, as required by Sec. 400.211(b), including its experience with 
loans to steel companies;
    (3) The scope, volume and duration of the Agent Lender's activity 
in administering loans;
    (4) The performance of the Agent Lender's loan portfolio, including 
its current delinquency rate;
    (5) The Agent Lender's loss rate as a percentage of loan amounts 
for its current fiscal year; and
    (6) Any other matter the Board deems material to its assessment of 
the Agent Lender.
    (d) A proposed loan for the purpose, in whole or in part, of 
refinancing existing credit provided by the Agent will not be approved 
unless the Board is satisfied that the Agent retains at least a 
substantially equivalent level of risk as a result of the refinancing.

[[Page 53080]]


    4. Section 400.203 is revised to read as follows:


Sec. 400.203  Guarantee percentage.

    A guarantee issued by the Board may not exceed 85 percent of the 
amount of the principal of a loan to a Qualified Steel Company. Subject 
to the provisions of this part, one or more third parties, public or 
private, may guarantee repayment of part of the Unguaranteed Portion of 
a loan guaranteed by the Board.

    5. Section 400.204 is amended by revising paragraphs (c)(2)(i) and 
(c)(3) to read as follows:


Sec. 400.204  Loan terms.

* * * * *
    (c) * * *
    (2) * * *
    (i) A fully perfected and enforceable security interest and/or 
lien, with first priority over conflicting security interests or other 
liens in all property acquired, improved or derived from the loan 
funds;
* * * * *
    (3) The entire loan will be secured by the same Security with equal 
lien priority for the Guaranteed Portion and the Unguaranteed Portion 
of the loan. The Unguaranteed Portion of the loan will neither be paid 
first nor given any preference over the Guaranteed Portion. A 
Supplemental Guarantor shall not have a security interest, direct or 
indirect, in any asset of the Borrower or any affiliate thereof other 
than the Security.
* * * * *

    6. Section 400.205 is amended by revising paragraph (a), by 
removing ``and'' at the end of paragraph (b)(10), by removing the 
period at the end of paragraph (b)(11) and adding ``; and'' in its 
place, and by adding a new paragraph (b)(12) to read as follows:


Sec. 400.205  Application process.

    (a) Application process. An original application and three copies 
must be received by the Board no later than 5 p.m. EST, August 31, 2001 
in the Board's offices at 1099--14th Street, NW, Suite 2600 East, 
Washington, DC 20005. Applications which have been provided to a 
delivery service with ``delivery guaranteed'' before 5 p.m. on August 
31, 2001 will be accepted for review if the Applicant can document that 
the application was provided to the delivery service with delivery to 
the address listed in this section guaranteed prior to the closing date 
and time. A postmark is not sufficient to meet this deadline as the 
application must be received by the required date and time. 
Applications will not be accepted via facsimile machine transmission or 
electronic mail.
    (b) * * *
    (12) A description of any Supplemental Guarantee(s) that will apply 
to the Unguaranteed Portion of the loan.
* * * * *

    7. Section 400.207 is amended by revising paragraph (b)(1) to read 
as follows:


Sec. 400.207  Application evaluation.

* * * * *
    (b) * * *
    (1) The ability of the Borrower to repay the loan by the date 
specified in the Loan Document, which shall be no later than December 
31, 2005. Evaluation of this factor will consider the prospective 
earning power of the Borrower. An essential and necessary element of 
the Board's evaluation of whether this criterion is satisfied is 
whether the applicant has committed to undertake significant efforts to 
eliminate or reduce economically unviable capacity;
* * * * *

    8. Section 400.208 is amended by revising paragraph (a)(3) to read 
as follows:


Sec. 400.208  Issuance of the Guarantee.

    (a) * * *
    (3) The Board's receipt of the Loan Documents and any related 
instruments, in form and substance satisfactory to the Board, and the 
Guarantee, all properly executed by the Lender, Borrower, and any other 
required party other than the Board; and
* * * * *

    9. Section 400.210 is revised to read as follows:


Sec. 400.210  Assignment or transfer of loans.

    (a) Neither the Loan Documents nor the Guarantee of the Board may 
be modified, in whole or in part, without the prior written approval of 
the Board.
    (b) Upon notice to the Board and a certification by the assignor 
that the assignee is an Eligible Lender, and subject to the provisions 
of paragraphs (c) and (d) of this section and other provisions of this 
part, a Lender may assign or transfer its interest in the loan 
including the Loan documents and the Guarantee to a party that 
qualifies as an Eligible Lender pursuant to Sec. 400.201. Any other 
assignment or transfer will require the prior written approval of the 
Board.
    (c) The provisions of paragraph (b) of this section shall not apply 
to transfers which occur by operation of law.
    (d) The Agent must hold and may not assign or transfer an interest 
in a loan guaranteed under the Program equal to at least the lesser of 
$25 million or fifteen percent of the aggregate amount of the loan. In 
addition, the Agent must hold and may not assign or transfer an 
interest the Unguaranteed Portion of the loan equal to at least the 
minimum amount of the loan required to be held by the Agent under the 
preceding sentence multiplied by the percentage of the loan represented 
by the Unguaranteed Portion. A non-Agent Lender must hold and may not 
assign or transfer an interest in the Unguaranteed Portion of the loan 
representing no less than five percent of such Lender's total interest 
in the loan; provided, that a non-Agent Lender may transfer its 
interest in the Unguaranteed Portion after payment of the Guaranteed 
Portion has been made under the Guarantee.

    10. Section 400.215 is added to read as follows:


Sec. 400.215  Supplemental Guarantees.

    The Board will allow the structure of a guaranteed loan to include 
one or more Supplemental Guarantees that cover the Unguaranteed Portion 
of the loan; provided that:
    (a) There shall be no Supplemental Guarantee with respect to the 
Unguaranteed Portion required to be held by the Agent pursuant to 
Sec. 400.210(c);
    (b) The Loan Documents relating to any Supplemental Guarantee shall 
be acceptable in form and substance to the Board; and
    (c) In approving the issuance of a Guarantee, the Board may impose 
any conditions with respect to Supplemental Guarantee(s) relating to 
the loan that it considers appropriate.

[FR Doc. 01-26337 Filed 10-16-01; 10:41 am]
BILLING CODE 1310-FP-P